VAT loophole

wallycool

I own a company and am registered for VAT ie I can claim back VAT on invoices. Hypothetically speaking, if i bought
a toyota landcruiser (30020euro+7980euroVAT) and claimed back the VAT at 21% and in one year resell the Landcruiser to a family member/friend at a knock down rate (3950euro+1050euroVAT).
Then in year two your family member/friend resells the landcrusier for the proper depreciated value of -4000 per year (getting 30000euro).
So therefore you have technically had a new landcruiser for 2 years and it has only cost you 1050euro ie the VAT paid back to the government on the resale of the Landcruiser to the family member/friend.
Could you please help me out and tell me if this would work.

Baby4

This post has been deleted.

Zulu

Well for one, your company bought and sold the car - so your company earned the profit not you, so I'd imagine it'd have a knock on effect to your taxable earnings?

Zulu

Zulu wrote: »

Well for one, your company bought and sold the car - so your company earned the profit not you, so I'd imagine it'd have a knock on effect to your taxable earnings?

But hasn't the company has made a loss on the transaction, or am I missing something?

OP, on first read that does not sound feasible to me, there are some auidit and tax issues that some to mind, not least the issue of transactions with family members and connected parties.

It would not take long for a Revenue auditor to drive a hole through this kind of structured transaction!

Mr. Incognito

Firstly you cannot reclaim the VAT as it is bought in a personal capacity.

Secondly you cannot charge VAT on the transaction to a family member as you are not a car dealership and hense Revenue will not grant a reclaim.

Thirdly connected person's legislation would make this sort of thing illegal, but you knew that anyway.

Fourthly depreciation is charged on market value not the undersale value.

Fifthly, it's a very stupid idea. There are a lot of other considerations like when you go to a car dealer for a trade in and they see two owners and give you a nice knockdown on your offer price.

jameshayes

SetantaL wrote: »

Fourthly depreciation is charged on market value not the undersale value.

Could claim that the car was damaged...